Financial Reporting and Regulatory Update

Second Quarter 2022

From the GASB

Final standards

Omnibus 2022

On May 9, 2022, the Governmental Accounting Standards Board (GASB) issued Statement 99, “Omnibus 2022,” to address accounting and financial reporting issues identified during the implementation and application of certain GASB pronouncements or during the due process on other pronouncements.

The statement covers these issues:

  • Accounting and financial reporting for exchange or exchange-like financial guarantees
  • Classification and reporting of certain derivative instruments that are neither hedging derivative instruments nor investment derivative instruments
  • Clarification of certain provisions of:
    • Statement 34, “Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments,” as amended, related to the focus of the governmentwide financial statements
    • Statement 87, “Leases,” related to the determination of the lease term, short-term lease classification, identification of lease incentives, and the recognition and measurement of lease liabilities and lease assets
    • Statement 94, “Public-Private and Public-Public Partnerships and Availability Payment Arrangements,” related to 1) the determination of the public-private and public-public partnership (PPP) term and 2) recognition and measurement of installment payments and the transfer of the underlying PPP asset
    • Statement 96, “Subscription-Based Information Technology Arrangements,” related to the subscription-based information technology arrangement (SBITA) term, classification of a SBITA as a short-term SBITA, and recognition and measurement of subscription liabilities
  • Extending the period during which the London Interbank Offered Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of certain interest-rate swaps
  • Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistance Program (SNAP)
  • Disclosures related to nonmonetary transactions
  • Pledges of future revenues when resources are not received by the pledging government
  • Updating certain terminology for consistency with existing authoritative standards

Effective dates

The requirements of this statement are effective as follows:

  • The requirements related to extension of the use of LIBOR; accounting for SNAP distributions; disclosures of nonmonetary transactions; pledges of future revenues by pledging governments; clarification of certain provisions in Statement 34, as amended; and terminology updates related to Statement 53 and Statement 63 are effective upon issuance.
  • The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.
  • The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.

Earlier application is encouraged and is permitted by topic.

Accounting changes and error corrections

On June 13, 2022, the GASB issued Statement 100, “Accounting Changes and Error Corrections.” The statement is designed to improve the accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.

The statement defines the following categories of accounting changes or error corrections and prescribes the applicable accounting and financial reporting guidance for each category:

  • Changes in accounting principles. Report retroactively by restating prior periods.
  • Changes in accounting estimates. Report prospectively by recognizing the change in the current period.
  • Changes to or within the financial reporting entity. Report by adjusting beginning balances of the current period.
  • Corrections of errors in previously issued financial statements. Report retroactively by restating prior periods.

The statement also establishes how accounting changes and error corrections should be displayed in financial statements, disclosed in notes, and presented in required supplementary information (RSI) and supplementary information (SI):

  • Display in financial statements. The aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, should be displayed by reporting unit.
  • Disclosure in the notes. Descriptive information about accounting changes and error corrections, such as their nature, should be disclosed in notes to financial statements. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated.
  • Presentation in RSI and SI. For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles.

Effective date

The requirements of this statement are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.

Compensated absences

On June 16, 2022, the GASB issued Statement 101, “Compensated Absences,” to enhance the recognition and measurement guidance for compensated absences and refine related disclosure requirements.

The statement supersedes Statement 16, “Accounting for Compensated Absences,” and aligns recognition and measurement guidance for all types of compensated absences under a unified model. This statement requires that a liability for compensated absences be recognized if all of these occur:

  • The leave is attributable to services already rendered.
  • The leave accumulates.
  • The leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means.

The general approach for measurement is accumulated leave multiplied by an employee’s pay rate as of the financial reporting date. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities. This statement requires that a liability for certain types of compensated absences – including parental leave, military leave, and jury duty leave – not be recognized until the leave commences.

This statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences.

Effective date

The requirements of this statement are effective for fiscal years beginning after Dec. 15, 2023, and all reporting periods thereafter. Earlier application is encouraged.

Financial statement disclosures criteria concepts statement

On July 7, 2022, the GASB issued Concepts Statement No. 7, “Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements: Notes to Financial Statements – an Amendment of GASB Concepts Statement No. 3.” The statement would provide enhanced guidance when the GASB establishes note disclosure requirements for state and local governments and would establish new criteria for state and local governments to follow in developing their disclosures for notes to financial statements.

The concepts statement describes the purpose of notes to financial statements and the intended users of notes. It addresses the types of information that are appropriate or not appropriate for note disclosures. In addition, the proposal addresses the degree of importance that information disclosed in the notes should possess and the characteristics that distinguish information that is considered essential to users in making economic, social, or political decisions or assessing accountability. Information is considered essential if it is distinguished by the following characteristics:

  • The information has or is expected to have a meaningful effect on users’ analyses for making decisions or assessing accountability.
  • A breadth or depth of users use or are expected to use the information in their analyses for making decisions or assessing accountability.

The concepts included in this concepts statement establish that information disclosed in notes to financial statements should correspond to the reporting units presented in the financial statements.

Concepts statements identify the objectives and fundamental principles that can be applied to address numerous accounting and financial reporting issues. Concepts statements do not, however, prescribe the accounting and financial reporting standards that apply to a particular item or event.


Certain risk disclosures exposure draft

On June 30, 2022, the GASB issued an exposure draft, “Certain Risk Disclosures,” which would provide users of government financial statements with essential information about risks related to a government’s current vulnerabilities due to certain concentrations and certain constraints common in the governmental environment.

This proposed statement defines a concentration as a lack of sufficient diversity related to an aspect of a significant revenue source or expense. It defines a constraint as a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority.

A government would be required to disclose information about a concentration or constraint if all of the following criteria are met:

  • A concentration or constraint is known to the government prior to the issuance of the financial statements.
  • An event associated with the concentration or constraint either has occurred or is more likely than not to begin to occur within 12 months of the financial statement date or shortly thereafter (for example, 3 months).
  • It is at least reasonably possible that within three years of the financial statement date, the event will cause there to be a substantial effect on the government’s ability to continue to provide services at the level provided in the current reporting period or meet its obligations as they come due.

If a government determines that these requirements for disclosure have been met for a concentration or constraint, the notes to the financial statements would disclose descriptions of 1) the concentration or constraint, 2) each event associated with the concentration or constraint, and 3) actions taken by the government prior to the issuance of the financial statements to mitigate the effect.

Comments are due Sept. 30, 2022.

ESG-related paper

The GASB on May 31, 2022, released a paper, “Intersection of Environmental, Social, and Governance Matters With Governmental Accounting Standards,” to explain how ESG matters intersect with public accountability in many GASB standards and how ESG matters may affect amounts reported and disclosed in the financial statements. The document provides an overview of ESG reporting including defining ESG matters for purposes of the document and providing examples of topics that interested parties commonly consider ESG matters. The document explains how ESG matters, predominantly social and governance matters, intersect with the notion of being publicly accountable to citizens in many GASB standards. Various examples are provided in which the objectives of specific GASB standards may intersect with environmental, social, and governance matters.